Free lunch, only for rich
Devinder Sharma, Jan 30, 2013
India Inc got a tax exemption of Rs 5.29 lakh crore, as ‘incentive for growth,’ good enough to wipe out the fiscal deficit.
In
the run up to Budget 2013, I hear it every day. Subsidies are doles to
the poor, must be curbed. There are no ‘free lunches.’ While social
security for a majority of India’s population is being considered as
‘free lunch,’ hardly anyone questions the ‘free monthly ration’ that the
industry is being given year after year.
Subsidies have become a
bad word. The massive subsidies that the rich get therefore are dubbed
as ‘incentives for growth.’ Poor get subsidies, the rich thrive on
‘incentive for growth’. While the total budget expenditure in 2012-13
was Rs 14.9 lakh crore, the subsidies have risen to Rs 1.78 lakh crore,
and the clamour is for pruning the subsidies to reduce the fiscal
deficit. Bulks of these subsidies go for food, fertiliser and petroleum.
In the past few months, the government has steadily withdrawn
from providing petroleum subsidies by decontrolling petrol and lately by
partially decontrolling diesel. Subsidised LPG supplies have also been
curtailed. In case of food and fertiliser, all kinds of permutations and
combinations are being tried out and some new proposals are waiting
including direct cash transfer. Kerosene subsidies so far have escaped
the scissors. Rail fares have been hiked after a decade. The hike is
expected to provide Rs 6,600-crore every year.
So in a way, the
government is on the right path with all ‘free lunches,’ as most
economists and consultancy firm executives who appear on TV regularly
say, being gradually withdrawn. But when it comes to industry, not only
the bread and butter but the entire monthly ration is being provided
free. The only difference, as I said earlier, is that these subsidies
are under the head ‘incentive for growth,’ which is a very clever way of
camouflaging the dirty subsidies.
Let me begin by citing the
latest exemption. C Rangarajan, the chief economic advisor to the prime
minister has recently proposed that the super-rich in India should be
taxed at a higher rate -- 40 per cent, against the present norm of 30
per cent. All hell broke loose the moment he said this. India Inc and
business TV channels have launched an orchestrated campaign to see that
the super-rich are not brought under a higher tax slab.
Raising
the income tax limit for the super-rich will bring in Rs 22,000-crore
revenue every year. But the rich should not be taxed, it will kill
entrepreneurship, is the oft-repeated argument. A few days back, the
stock market crossed 20K index because the government deferred the
introduction of GAAR to 2016. This move alone would have curbed the
inflow of dirty money (and often bloody money) coming from the tax haven
of Mauritius.
Gross irregularity
The
chairpersons of FICCI and CII, and all top business honchos were visibly
elated that GAAR has been deferred. If implemented, this move alone
would have mopped up anything exceeding Rs 50,000 crore. In any case, it
is the rich who circumvent tax laws to escape paying the legitimate
taxes. Finance minister P Chidambaram had lamented that out of the 3.5
crore people who pay taxes, only 14.6 lakh have shown an income
exceeding Rs 10 lakh/year. Now this is certainly a gross irregularity,
and all out efforts must be made to ensure that there is proper
compliance of the tax laws.
But has there been any serious
effort in recovering the taxes that are due from the rich? Well, your
guess is as good as mine. No, never. After all, the rich must continue
to get their free ration. On top of it, in 2012 Budget, under the
‘revenue foregone’ category, India Inc got a tax exemption, of course as
‘incentive for growth’ of Rs 5.29 lakh crore, good enough to wipe out
the entire fiscal deficit that Chidambaram keeps on crying about.
Since
2004-05, the revenue foregone adds up to more than Rs 27 lakh crore.
And yet, the exports have not risen, the manufacturing sector is down,
and the industry continues to slog. But despite the industrial
stagnation and downturn that is visible all these years, the crporates
are sitting over a huge cash pile. By March 2012, Indian Inc had hoarded
a cash surplus of Rs 9-lakh crore. Therefore quite obviously the free
monthly ration is adding to the bottom line of the companies.
Add
to the tax exemptions, usurping of natural resources, including
forests, mineral resources, water and land, aided and abetted by the
government. The land grab that is taking place, and the manner in which
laws are being formulated to benefit the industry, is also a covert form
of subsidy. It is only that we don’t want to see these subsidies or we
are paid not to demystify these subsidies.
Most of us are
beneficiaries of the same system that subsidises the rich, and obviously
we wouldn’t like to cut the hand that feeds us. All this is in the name
of encouraging entrepreneurship. If the industrialists are
entrepreneurs, isn’t the farmer, the artisan, the petty shopkeeper and
for that the struggling aam aadmi also an entrepreneur? How come that he
doesn’t need any support, and it is only the rich who deserve to live
on state exchequer?
source: Deccan Herald 31-01-2013 editorial
http://www.deccanherald.com/content/308787/free-lunch-only-rich.html
with Dr. Marcel Remon, Director, FUCID
Ms.Rita Rixen
FUCID
Jesuit Community
